Children’s Hospital to help form diagnostics company

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SAN FRANCISCO — Big drug companies and biotechnology start-ups have forged ­alliances in recent years to share the risks of new ventures, and now that trend is spreading to nonprofit hospitals as government funding for research and expansion projects becomes harder to secure.

In the latest such deal, Boston Children’s Hospital, the nation’s largest pediatric research medical center, said Tuesday that it has struck a partnership with a California diagnostics equipment maker to form a company to develop tests for pediatric diseases and interpret results.

The company, Claritas ­Genomics, will be based in Waltham, Mass., where Harvard-affiliated Boston Children’s Hospital opened a genetics diagnostic lab two years ago. The hospital’s parent organization, Boston Children’s Medical Center, will own a majority stake, while a minority will be controlled by its partner, Life Technologies Corp. of Carlsbad, Calif.

“At a time of declining [health care] reimbursements, it’s very difficult to raise capital in the nonprofit environment,” said David Margulies, executive director of the gene partnership project at Children’s Hospital.

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To tap private funding, executives from more than 20 major US research and teaching hospitals — including Partners HealthCare’s Gary Gottlieb and Tufts Medical Center’s Eric Beyer — were
at the annual J.P. Morgan Healthcare Conference in San Francisco to tell similar stories to some of the 8,000 investors in attendance. They also are meeting privately with prospective bond buyers.

Months before the conference, Boston-based Partners — which owns Massachusetts General and Brigham and Women’s hospitals — was ­already staking out this new funding territory. It signed up with genetic analysis firm Illumina Inc. in an effort to turn the Massachusetts health care giant’s research into revenue. The San Diego company will install Partners-designed software in an Illumina gene sequencing hardware system being marketed to clinical research laboratories around the United States and abroad.

Speaking at the conference, Gottlieb said investors can expect further moves by Partners to commercialize its technology. “The research side is a giant opportunity for us, and one that we need to exploit,” he said.

Beyer, meanwhile, said Tufts Medical Center can no longer count on receiving increases in National Institutes of Health research grants at a time when the need to reduce the federal deficit is the dominant subject in Washington, D.C. Last year, Tufts hosted an innovation day aimed at venture capitalists to show off technology developed in its research labs. Private funding “will become a significant part of our portfolio going forward,” Beyer told investors.

Officials at nonprofit hospitals insist their deals with private-sector partners — ranging from investing in start-ups to founding for-profit businesses — are mostly about furthering their mission of providing health care to patients and spreading best practices.

“Our goal in this venture is to continue to be a world leader in caring for children,” Boston Children’s president Sandra Fenwick said of the alliance with Life Technologies that was unveiled in San Francisco. “This will be a tool to help in the treatment of rare diseases. We will be offering both the testing and the medical interpretation to physicians.”

Fenwick would not discuss financial terms of the collaboration with Life Technologies, although she did say any money generated would — for now — be poured back into the new operation, Claritas Genomics.

At a conference presentation made before investors, Life Technologies chief executive Gregory Lucier said his company would own 20 percent of the joint venture.

“The goal here is to establish the know-how, the practice of pediatric care using genomics,” Lucier said.

As with the Partners-Illumina effort, Boston Children’s and Life Technologies are developing an integrated hardware and software system for testing and interpreting tests for cancer and rare diseases in children that can be used at Boston Children’s and other pediatric hospitals. In essence, they are creating a personalized medicine standard that helps doctors identify which treatments are most effective for specific patients.

Children’s Hospital has about 15 people working full time on its genomic sequencing and molecular diagnostics technology under the direction of Margulies, a hospital doctor turned entrepreneur who returned to Children’s in 2011. But between 80 and 100 other hospital employees, from researchers to software developers, also are contributing to the effort.

The Life Technologies deal comes as many large life sciences companies — traditionally the core of medical research and development — are closing labs and scaling back on research projects to save money.

In a report released Tuesday, the Tufts Center for the Study of Drug Development said drug makers must embrace new research models to replenish their product lines and make research more efficient.

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